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Question
Due to installation of a machine with latest technology, the cost of production has decreased. It will lead to ______.
Options
Expansion in supply
Increase in supply
Contraction in supply
Decrease in supply
Solution
Due to installation of a machine with latest technology, the cost of production has decreased. It will lead to increase in supply.
Explanation:
When the cost of production decreases due to the installation of machines with the latest technology, producers can supply more of the commodity at the same price or offer the same quantity at a lower price. This shift increases supply, so the supply curve shifts to the right.
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